European competition commissioner Neelie Kroes wrote a letter to foreign secretary David Miliband suggesting that Channel 4 had enough money to pay for the digital expansion itself, adding that the government admitted that C4’s cash reserves totalled £170m.

Her letter said: “The commission has doubts as to whether the financial support pledged for C4 is necessary and proportional.”

“The mere fact that the switchover may affect its profitability (but not viability) does not constitute a valid reason for claiming state funding.”